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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE GEON COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GREGORY L. RUTMAN, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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LOGO
THE GEON COMPANY
NOTICE OF 1998
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
<PAGE> 3
THE GEON COMPANY
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
The Annual Meeting of Stockholders of The Geon Company will be held at The
Forum Conference & Education Center, 1375 E. Ninth Street, Cleveland, Ohio at
9:00 a.m. on Thursday, May 7, 1998. The purposes of the meeting are:
1. To elect Directors; and
2. To consider and transact any other business that may properly come
before the meeting.
Stockholders of record at the close of business on March 16, 1998 are
entitled to notice of and to vote at the meeting.
For the Board of Directors
/s/ Gregory L. Rutman
GREGORY L. RUTMAN
Secretary
March 20, 1998
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THE GEON COMPANY
PROXY STATEMENT
The Board of Directors of The Geon Company (the "Company") respectfully
requests your proxy for use at the Annual Meeting of Stockholders to be held on
May 7, 1998, and at any adjournments of that meeting. This Proxy Statement is to
inform you about the matters to be acted upon at the meeting.
If you attend the meeting, you may vote your shares by ballot. If you do
not attend, your shares may still be voted at the meeting if you sign and return
the enclosed proxy card. Common Stock represented by a properly signed card will
be voted in accordance with the choices marked on the card. If no choices are
marked, the shares will be voted to elect the nominees listed on pages 3 through
5. You may revoke your proxy before it is voted by giving notice to the Company
in writing or orally at the meeting. Participants in the Company's Retirement
Savings Plan will receive a separate voting instruction card which must be
signed and returned in order to instruct the trustee of that plan with respect
to shares held under that plan by the trustee. The voting instruction card may
be revoked before the trustee votes the shares held by it by giving notice in
writing to the trustee.
This Proxy Statement and the enclosed proxy card and, for participants in
the Retirement Savings Plan, the voting instruction card are being mailed to
stockholders on or about March 20, 1998. The Company's headquarters are located
at One Geon Center, Avon Lake, Ohio 44012. The Company's telephone number is
(440) 930-1000.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of nine directors. Each
director serves for a one year term and until a successor is duly elected and
qualified. The Board met seven times during the last fiscal year.
A stockholder who wishes to suggest a director candidate for consideration
by the Nominating and Governance Committee must provide a written notice to the
Secretary of the Company in accordance with the procedures specified in Article
I, Section 9 of the Company's By-Laws. Generally, the notice must be received by
the Secretary of the Company not less than 60 nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting and must set forth, as
to each nominee, the name, age, principal occupations and employment during the
past five years, name and principal business of any corporation or other
organization in which such occupations and employment were carried on, and a
brief description of any arrangement or understanding between such person and
any others pursuant to which such person was selected as a nominee and, as to
the stockholder giving the notice and any beneficial owner on whose behalf the
nomination is being made, the name and address of, and the class and number of
shares of the Company owned by, such stockholder, beneficial owner, and any
other stockholders believed to be supporting such nominee.
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Nominees for election as directors for terms expiring in 1999 and a
description of the business experience of each nominee appear below. With the
exception of Thomas A. Waltermire, the nominees are all current members of the
Board. William F. Patient, J.A. Fred Brothers, J. Douglas Campbell, James K.
Baker, and John D. Ong have been directors since 1993. D. Larry Moore and R.
Geoffrey P. Styles have been directors since March 9, 1994 and Gale Duff-Bloom
has been a director since November 18, 1994. Harry A. Hammerly, who has served
as a director since March 9, 1994, is not seeking re-election.
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WILLIAM F. PATIENT, age 63, is Chairman of the Board and Chief Executive Officer of
W. F. PATIENT PHOTO the Company, and has served in this capacity since the Company's initial public
offering in April 1993 (the "IPO"). Mr. Patient served as President of the Company
from April 1993 to February 1998 and as Senior Vice President of The B.F.Goodrich
Company and as President of its Geon Vinyl Division from May 1989 to April 1993.
Prior to joining The B.F.Goodrich Company, Mr. Patient held various positions with
Borg-Warner Chemicals from 1962 to 1989. He serves on the Boards of Directors of
National City Bank and Navistar International Corporation.
JAMES K. BAKER, age 66, is serving as Vice Chairman of Arvin Industries, Inc., an
J. K. BAKER PHOTO auto parts supplier to the original equipment and replacement markets, until his
retirement in April 1998. Mr. Baker served as Chief Executive Officer of Arvin from
1981 to 1993 and as Chairman from 1986 to February 1996. He will retire as a
Director of Arvin in April 1998. Mr. Baker serves on the Boards of Directors of
First Chicago NBD, Inc., Cinergy Corp., Tokheim Corp., and Amcast Industrial Corp.
GALE DUFF-BLOOM, age 58, is President of Marketing and Company Communications of
G. DUFF-BLOOM PHOTO J.C. Penney Company, Inc., a major retailer. Ms. Bloom has served in her current
position since February 1996. Ms. Bloom joined J.C. Penney in 1969 and was elected
Vice President and Director of Investor Relations in 1988. In 1990, Ms. Bloom was
appointed to the positions of Senior Vice President and Associate Director of
Merchandising. In 1993, she was appointed Executive Vice President and Director of
Administration, and, in 1995, she was appointed Senior Executive Vice President and
Director of Personnel and Company Communications. Ms. Bloom serves on the Boards of
Directors of Chase Bank of Texas and several professional and civic organizations.
In October 1996, she was elected Chair of the Council of the Better Business Bureau.
</TABLE>
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J.A. FRED BROTHERS, age 57, is Executive Vice President of Ashland Inc., a
J.A. FRED BROTHERS diversified company with operations in specialty chemical production and distri-
PHOTO bution, motor oil and car care products, and highway construction. Mr. Brothers
joined Ashland Inc. in 1967 and became a Group Operating Officer in 1988. Mr.
Brothers is responsible for The Valvoline Company and is a director of Marathon
Ashland Petroleum, a company in which Ashland, Inc. has a 38% equity interest. He is
also a trustee of Ohio Dominican College and Children's Hospital (Columbus).
J. DOUGLAS CAMPBELL, age 56, served as President and Chief Executive Officer and a
J. D. CAMPBELL Director of Arcadian Corporation, a nitrogen chemicals and fertilizer manufacturer,
PHOTO until his retirement in 1997. Mr. Campbell joined Arcadian Corporation as President
and Chief Executive Officer in December 1992. Prior to joining Arcadian Corporation,
he held various positions with Standard Oil (Ohio) and British Petroleum since 1966,
most recently as Deputy Chief Executive Officer of BP Chemicals.
D. LARRY MOORE, age 61, served as President and Chief Operating Officer of
D. L. MOORE PHOTO Honeywell, Inc., a multinational manufacturer of controls for use in homes,
buildings, industry, and space and aviation, until his retirement in 1997. In 1987,
Mr. Moore became Vice President of Honeywell's Commercial Flight Systems Group, and
in 1989 he became President of Honeywell's Space and Aviation business. In 1990, he
became Executive Vice President and Chief Operating Officer of Honeywell's
Industrial and Space and Aviation businesses. In April 1993, he was elected
President and Chief Operating Officer. Mr. Moore serves on the Boards of Directors
of Reynolds Metals Company, Thiokol Corporation, and Howmet Corporation.
JOHN D. ONG, age 64, is Chairman Emeritus of The B.F.Goodrich Company, a supplier of
J. D. ONG PHOTO components and services to the aerospace industry and producer of specialty
chemicals and plastics. Mr. Ong joined The B.F.Goodrich Company in 1961, became
Chairman of the Board and Chief Executive Officer in July 1979, served as Chief
Executive Officer until December 1996, and retired from The B.F.Goodrich Company as
Chairman in July 1997. Mr. Ong is a Director of Ameritech Corporation, ASARCO Inc.,
Cooper Industries, Inc., Defiance, Inc., The Kroger Co. and TRW, Inc.
</TABLE>
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<TABLE>
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R. GEOFFREY P. STYLES, age 67, served as Vice Chairman of the Royal Bank of Canada
R. G. P. STYLES until his retirement in December 1987. He is currently Chairman and a Director of
PHOTO Grosvenor International Holdings Ltd. Mr. Styles is also a Director of ProSource,
Inc. and of several Canadian corporations, including The Royal Trust Company, Echo
Bay Mines Ltd. and Onex Corporation.
THOMAS A. WALTERMIRE, age 48, is President and Chief Operating Officer of the
T. A. WALTERMIRE Company and has served in this capacity since February 1998. From May 1997 to
PHOTO February 1998, Mr. Waltermire served as Executive Vice President and Chief Operating
Officer and from October 1993 until May 1997 as Chief Financial Officer of the
Company. Mr. Waltermire joined the Company as Senior Vice President and Treasurer in
March 1993 just prior to the IPO. Prior to joining the Company, Mr. Waltermire held
various positions with The B.F.Goodrich Company.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS; ATTENDANCE
The present members of the Audit Committee are Ms. Duff-Bloom and Messrs.
Campbell, Moore, and Styles. Mr. Styles serves as Chairperson of the Committee.
The Audit Committee meets with appropriate Company financial and legal personnel
and independent public accountants to review the internal controls of the
Company and its financial reporting. The Audit Committee recommends to the Board
of Directors the appointment of the independent public accountants to serve as
auditors in examining the corporate accounts of the Company. The Audit Committee
met three times during the last fiscal year.
The present members of the Compensation Committee are Ms. Duff-Bloom and
Messrs. Baker, Moore, and Ong. Ms. Duff-Bloom serves as Chairperson of the
Committee. The Compensation Committee reviews, discusses and advises management
and makes recommendations to the Board of Directors regarding compensation and
benefits afforded the executive officers and highly-compensated personnel of the
Company. The Committee also has oversight responsibilities for all broad-based
compensation and benefit programs of the Company. The Compensation Committee met
five times during the last fiscal year.
The present members of the Nominating and Governance Committee, formerly
known as the Nominating Committee, are Ms. Duff-Bloom and Messrs. Baker,
Campbell, and Ong. Mr. Ong serves as Chairperson of the Committee. The
Nominating and Governance Committee recommends to the Board of Directors
candidates for nomination as directors of the Company. The Nominating and
Governance Committee is also authorized to recommend to the Board of Directors a
successor to the Chairman of the Board, Chief Executive Officer, President and
Chief Operating Officer, if any, of the Company and, together with the Chief
Executive Officer, to plan and monitor the development of candidates for
executive personnel reporting to the Chief Executive Officer. The Nominating and
Governance Commit-
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tee met three times during the last fiscal year. At its November 1997 meeting,
the Committee changed its name from the Nominating Committee to the Nominating
and Governance Committee.
The present members of the Environmental, Health, and Safety Committee are
Messrs. Brothers, Campbell, Moore, and Styles. Mr. Moore serves as Chairperson
of the Committee. The Environmental, Health, and Safety Committee exercises
oversight with respect to the Company's environmental, health, and safety
policies and practices and its compliance with related laws and regulations. The
Environmental, Health, and Safety Committee met twice during the last fiscal
year.
The present members of the Financial Policy Committee are Messrs. Baker,
Brothers, Ong, and Styles. Mr. Baker serves as Chairperson of the Committee. The
Financial Policy Committee reviews the policies which underlie the Company's
financial planning to assure adequacy and soundness of the Company's capital
plans; reviews proposed major financing activities prior to action by the Board
of Directors; and reviews methods under consideration by the Company for
financing proposed major investments prior to action by the Board of Directors.
The Financial Policy Committee met four times during the last fiscal year.
During the last fiscal year, each Director attended at least 75% of the
meetings of the Board of Directors and of the Committees on which he or she
served.
COMPENSATION OF DIRECTORS
Directors unaffiliated with the Company are paid an annual retainer of
$20,000 and fees of $1,000 for each Board and Committee meeting attended. In
addition, the chairperson of each Committee receives a fixed annual retainer of
$3,000. In addition, upon retirement from the Board of Directors after reaching
the age of 55 with at least ten years of service as a Director, any Director
unaffiliated with the Company is entitled to receive an annual amount equal to
the fixed compensation level in effect at the time of retirement. A retiring
Director who has reached age 55 and has served for at least five but less than
ten years is entitled to a reduced amount equal to 50% of the fixed compensation
level in effect at retirement, plus 10% of such compensation level for each
additional year of service (rounded to the nearest whole year) up to ten.
Directors are reimbursed for their expenses associated with each meeting
attended.
Under The Geon Company Non-Employee Directors' Deferred Compensation Plan
(the "Directors Deferred Compensation Plan"), each Director who is not an
employee may defer payment of all or a portion of his or her compensation as a
Director. The compensation may be deferred as cash or converted into Common
Stock of the Company (at a rate equal to 125% of the cash compensation amount).
Deferred compensation, whether in the form of cash or Common Stock, is held in
trust for the participating Directors. Interest earned on the cash amounts and
dividends on the Common Stock accrue for the benefit of the participating
Directors.
Under the Company's 1995 Incentive Stock Plan (the "1995 Incentive Plan"),
each current Director who was not an employee of the Company was granted on the
date of the 1995 Annual Meeting an option to acquire 5,000 shares of Common
Stock. Each new Director who is not an employee of the Company is granted at the
time of his or her election or appointment a Director option to acquire 5,000
shares of Common Stock. Each such Director who continues in office following the
initial grant receives
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an additional Director option to acquire 1,000 shares of Common Stock annually
on the anniversary date of the previous option grant.
OWNERSHIP OF COMMON STOCK
The following table shows the number of shares of Common Stock beneficially
owned on March 16, 1998 (including options exercisable within 60 days of that
date) by each of the Directors and nominees, each of the executive officers
named in the Summary Compensation Table on page 15, and by all Directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES (1)
---- ----------
<S> <C>
James K. Baker.............................................. 12,958(2)(3)
Gale Duff-Bloom............................................. 9,344(2)(3)
J.A. Fred Brothers.......................................... 17,729(2)(3)
J. Douglas Campbell......................................... 14,058(2)(3)
Harry A. Hammerly........................................... 12,875(2)(3)
Donald P. Knechtges......................................... 114,934(2)(3)
Louis M. Maresca............................................ 118,062(2)(3)
Edward C. Martinelli........................................ 184,611(2)(3)
D. Larry Moore.............................................. 9,930(2)(3)
John D. Ong................................................. 8,000(3)
William F. Patient.......................................... 476,062(2)(3)
R. Geoffrey P. Styles....................................... 9,000(3)
Thomas A. Waltermire........................................ 185,922(2)(3)
13 Directors and executive officers as a group.............. 1,173,485(2)(3)
</TABLE>
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(1) Except as otherwise stated in the notes below, beneficial ownership of the
shares held by each individual consists of sole voting power and sole
investment power, or of voting power and investment power that is shared
with the spouse of the individual. It includes the approximate number of
shares credited to the named executives' accounts in the Company's
Retirement Savings Plan, a tax-qualified defined contribution plan. No
Director, nominee or executive officer, other than William F. Patient,
beneficially owned on March 16, 1998, more than 1% of the outstanding Common
Stock. As of that date, Mr. Patient beneficially owned approximately 1.7% of
the outstanding Common Stock and the Directors and executive officers as a
group beneficially owned approximately 4.2% of the outstanding Common Stock.
(2) Includes shares with respect to which the following Directors and executive
officers have only sole voting power as follows: J.K. Baker, 5,158 shares;
G. Duff-Bloom, 2,344 shares; J.A. Fred Brothers, 6,729 shares; J.D.
Campbell, 6,558 shares; H.A. Hammerly, 4,275 shares; D.P. Knechtges, 13,106
shares; L.M. Maresca, 13,727 shares; E.C. Martinelli, 8,000 shares; D.L.
Moore, 2,930 shares; W.F. Patient, 61,229 shares; and T.A. Waltermire,
24,669 shares; and the Directors and executive officers as a group, 148,725
shares. With respect to Ms. Duff-Bloom, Messrs. Baker, Brothers,
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Campbell, Hammerly, and Moore, these shares are held under the Directors
Deferred Compensation Plan.
(3) Includes shares the individuals have a right to acquire on or before May 15,
1998 as follows: each of the Directors, 7,000 shares, with the exception of
Mr. Patient, who is not eligible to participate in the Directors Deferred
Compensation Plan, and Mr. Hammerly who has the right to acquire 8,000
shares; D.P. Knechtges, 86,402 shares; L.M. Maresca, 91,879 shares; E.C.
Martinelli, 141,302 shares; W.F. Patient, 357,299 shares; T.A. Waltermire,
134,219 shares; and the Directors and executive officers as a group, 868,101
shares.
The following shows certain information with respect to all persons who, as
of March 16, 1998, were known by the Company to beneficially own more than five
percent of the outstanding shares of Common Stock of the Company based on
information provided in Schedule 13G filings with the Securities and Exchange
Commission:
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Brinson Partners, Inc. ................................. 1,609,589(1) 6.9%
209 South LaSalle Street
Chicago, Illinois 60604
Brinson Holding, Inc. ............................. (1)
209 South LaSalle Street
Chicago, Illinois 60604
SBC Holdings (USA), Inc. .......................... (1)
222 Broadway
New York, New York 10038
Swiss Bank Corporation............................. (1)
Aeschenplatz 6 CH-4002
Basel, Switzerland
Harris Associates L.P. ................................. 2,804,850(2) 12.09%
Harris Associates, Inc.
Two North LaSalle Street
Suite 500
Chicago, Illinois 60602
Harris Associates Investment Trust................. (2)
Two North LaSalle Street
Suite 500
Chicago, Illinois 60602-3790
MacKay-Shields Financial Corporation.................... 1,585,600(3) 6.8%
9 West 57th Street
New York, New York 10019
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Pioneering Management Corporation....................... 1,204,800(4) 5.19%
60 State Street
Boston, Massachusetts 02109
State Street Bank and Trust Company, as Trustee for
The Geon Company Retirement Savings Plan.............. 2,653,318(5) 11.4%
225 Franklin Street
Boston, Massachusetts 02110
Wellington Management Company, LLP...................... 2,852,300(6) 12.3%
75 State Street
Boston, Massachusetts 02109
Vanguard/Windsor Funds, Inc........................ (6)
c/o The Vanguard Group
100 Vanguard Boulevard
P.O. Box 2600
Malvern, Pennsylvania 19355
</TABLE>
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(1) As of February 11, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. Brinson Partners, Inc.
("Brinson"), as a registered investment advisor, has shared voting power and
shared dispositive power with respect to all of these shares with Brinson
Holding, Inc. ("BHI"), SBC Holdings (USA), Inc. ("SBC (USA)"), and Swiss
Bank Corporation ("SBC"). SBC is the ultimate parent holding company of
Brinson through its wholly-owned subsidiary, SBC (USA). SBC (USA)'s
wholly-owned subsidiary, BHI, is the parent holding company of Brinson.
(2) As of January 29, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. Of the 2,804,850 shares
beneficially owned by Harris Associates L.P. ("Harris"), as a registered
investment adviser, together with Harris Associates, Inc., Harris' sole
general partner, Harris has sole dispositive power with respect to 1,751,250
shares, shared dispositive power with respect to 1,053,600 shares and shared
voting power with respect to all of these shares. Included in the 1,053,600
shares with respect to which Harris has shared voting and investment power,
are 971,600 shares (4.19% of the outstanding shares of Common Stock of the
Company) beneficially owned by the Harris Associates Investment Trust
("Harris Trust"), through its various series. Harris Trust, a registered
investment company for which Harris serves as investment adviser, shares
voting and dispositive power with respect to these 971,600 shares with
Harris.
(3) As of February 13, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. MacKay-Shields Financial
Corporation, as a registered investment adviser, has shared voting and
shared dispositive power with respect to all of these shares.
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(4) As of January 5, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. Pioneering Management
Corporation, as a registered investment adviser, has sole voting power and
sole dispositive power with respect to all of these shares.
(5) As of February 10, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission. State Street Bank and
Trust Company, as Trustee for The Geon Company Retirement Savings Plan and
for various collective investment funds for employee benefit plans and other
index accounts, as a bank, has sole voting and sole dispositive power with
respect to 238,428 of these shares and shared voting and shared dispositive
power with respect to 2,414,890 of these shares.
(6) As of January 13, 1998, based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission by Wellington Management
Company. Wellington Management Company, as a registered investment adviser,
has shared voting power with respect to 318,800 of these shares and shared
dispositive power with respect to all of these shares. Of the 2,852,300
shares with respect to which Wellington Management Company has shared
dispositive power, 2,480,000 shares (10.69% of the outstanding shares of
Common Stock of the Company) are held by Vanguard/Windsor Funds, Inc., an
investment advisory client of Wellington Management Company. As of February
9, 1998, based upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission by Vanguard/Windsor Funds, Inc., as a
registered investment company, Vanguard/Windsor Funds, Inc. has sole voting
power and shared dispositive power with respect to all of those shares.
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EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
From May 1997 until February 1998, the Compensation Committee of the Board
of Directors (the "Committee") was comprised of Gale Duff-Bloom, its
Chairperson, James K. Baker, J.A. Fred Brothers, Harry A. Hammerly, and D. Larry
Moore. As of February 5, 1998, Mr. Hammerly resigned from the Committee, and Mr.
Brothers was replaced by John D. Ong.
The Committee's responsibilities include, but are not limited to, reviewing
and approving executive compensation, including base salary, cash bonuses and
stock incentive awards for the Chief Executive Officer and all other executive
officers of the Company.
GENERAL COMPENSATION PHILOSOPHY
The Committee believes that the total compensation package for executive
officers should be performance-oriented, tying a significant amount of
compensation to short and long-term financial and strategic objectives,
including increases in stockholder value. The Committee established the
following guiding principles for the Company's executive compensation program:
- A significant portion of executive officers' total compensation will be
dependent on the Company's annual and long-term performance, including
creation of stockholder value.
- Non-cash compensation programs will be designed to provide stock-based
incentives which will encourage stock ownership by executives in order to
better align stockholder and executive interests.
- Significant ownership of Company Common Stock by executive officers will
be encouraged.
At the Committee's February 1, 1995 meeting, the Committee adopted Company
stock ownership guidelines for the participants in the Company's Senior
Executive Management Incentive Plan (the "Executive MIP") and the Company's
Management Incentive Plan (the "MIP"). Under these guidelines, goals regarding
levels of stock ownership by executives were established to emphasize the
importance of stock ownership by management. The specified levels of stock
ownership (based on market prices), which are intended to be achieved over a
five-year period, range from five times annual salary for the Chief Executive
Officer, to four times annual salary for the Chief Operating Officer, three
times annual salary for other executive officers participating in the Executive
MIP, and one times annual salary for the least senior participants in the
Company's MIP.
At the December 12, 1996 meeting of the Board of Directors, the Board
formed a subcommittee of the Compensation Committee to address executive
compensation issues involving the grant of Company equity awards to executive
officers. The subcommittee is designated as the Executive Equity Compensation
Committee and includes only "non-employee directors," as defined for purposes of
the applicable rules under Section 16 of the Securities Exchange Act of 1934.
Until February 5, 1998, the subcommittee was made up of Ms. Duff-Bloom, its
Chairperson, and Messrs. Baker, Hammerly, and Moore. As of that date, Mr.
Hammerly resigned from the subcommittee.
EXECUTIVE COMPENSATION
BASE SALARIES
In 1997, the Company established salaries based on salaries of comparable
positions included in published surveys and a survey of a group of companies
provided by the Committee's independent
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executive compensation consultant, Frederic W. Cook & Co., Inc. The survey
prepared by Frederic W. Cook & Co., Inc. includes companies that generally
compete with the Company for executive talent and from whom the Company may
recruit future executives. This comparison group includes companies from many
different industries and therefore differs from the group of companies used in
the performance graph appearing below under the heading "Company Stock
Performance" on page 21. The companies used in the performance graph are
generally the companies with which the Company competes for capital and may be
considered useful and appropriate for comparing the Company's stock performance.
With the exception of officers who were promoted during 1997, executive
officers' salaries for 1997 were not materially changed from 1996. Based on the
Company's performance in 1997, salary increases were made for executive officers
for 1998.
INCENTIVE COMPENSATION
Deduction Limitation on Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder ("Section 162(m)") preclude a publicly-held corporation from taking a
deduction for certain compensation in excess of $1 million paid or accrued with
respect to certain executive officers. It is the Committee's intent that the
Company's executive compensation program be designed to allow maximum possible
deductibility of executive compensation by the Company.
The Executive MIP was approved by the stockholders at the 1995 Annual
Meeting and provides for awards that are wholly contingent on the attainment of
Committee established performance goals, eliminates the Committee's discretion
to increase the amount of incentive awards, and provides for administration by a
committee of outside directors. The Committee believes that the Executive MIP
satisfies the Internal Revenue Service's requirements for "performance-based"
compensation under Section 162(m). Under Section 162(m), performance-based
compensation is not subject to the deductibility limitation under current
Internal Revenue Service regulations. The Committee expects that awards under
the Executive MIP will be comparable to awards that would have been made to the
executive officers under the MIP.
Cash and Stock Incentives. The executive officers, including the Chief
Executive Officer, are eligible annually to receive bonus awards, consisting of
restricted stock or a combination of both restricted stock and cash, under the
Company's Executive MIP. Each year the Committee establishes performance
measures to be used to determine an appropriate payout, if any, under the
Executive MIP. Target awards, stated as a percentage of salary, are determined
by the Committee at the beginning of the plan year, although the Committee
retains the discretion to reduce such award depending on an executive officer's
(including the Chief Executive Officer) individual performance and the Company's
performance in meeting established goals. The Executive MIP also establishes
threshold levels below which no incentives will be paid.
The Incentive Stock Plan, which was also approved by the stockholders at
the 1995 Annual Meeting of Stockholders, includes provisions for the award of
performance-based compensation that would not be subject to the deductibility
limitations. The Committee will continue to monitor its compensation policy,
including compensation, if any, paid under the Executive MIP and the Incentive
Stock Plan, for deductibility under Section 162(m).
12
<PAGE> 15
The performance measures used for 1997 under the Executive MIP were based
on cash flow, Company-created income (for example, income due to Company
initiated cost reductions or productivity improvements), and relative total
return to stockholders. Had Company performance met the established goal for
each performance measure, cash flow performance would have contributed 40% of
the total award; Company-created income performance would have contributed 40%;
and relative total return to stockholders performance would have contributed
20%.
The Company exceeded threshold performance targets for cash flow and
Company-created income. The performance goal for relative total return to
stockholders was not met. Based on 1997 performance, 1997 bonuses were
approximately 75% of target as compared to approximately 40% of target in 1996.
In determining the actual awards to the executive officers for 1997 under
the Executive MIP, the Committee considered each executive's performance against
personal goals as well as the Company's overall performance against established
goals. The net result of performance relative to the 1997 performance guidelines
and the Committee's review of individual executive officer performance resulted
in an average award to the executive officers of approximately 42% of each
executive officer's salary.
Under the terms of the Executive MIP, as more fully described in footnote 1
to the Summary Compensation Table appearing on page 15, 40% of any award under
the Executive MIP to the executive officers, including the Chief Executive
Officer, is paid in the form of restricted stock awarded under the Company's
1995 Incentive Stock Plan (the "Incentive Stock Plan"). Recipients of awards
under the Executive MIP may elect to receive the balance of any such award in
the form of restricted stock, so that up to 100% of any award under the
Executive MIP may be paid in the form of restricted stock. To the extent that
any award is paid in the form of stock, that payment is enhanced by a 25%
premium, i.e., for every $100 otherwise payable under the Executive MIP to an
executive, $125 worth of restricted stock is awarded to that executive. With
respect to 1997 awards under the Executive MIP, approximately 76% of those
awards were paid in the form of restricted stock.
In addition to bonuses awarded under the Executive MIP, executive officers
may also receive incentive awards under the Incentive Stock Plan. These
incentives may be granted in the form of stock options, stock appreciation
rights, and other stock awards which may include restricted stock and
performance incentive stock. These awards are used in conjunction with salary
and bonus awards to create an executive compensation package that meets the
Committee's above-described compensation philosophy and that is competitive with
comparable companies. As noted in the Summary Compensation Table appearing on
page 15, executive officers, other than the Chief Executive Officer, received
options to acquire an aggregate of 56,000 shares of Common Stock under the
Incentive Stock Plan in 1997. The Committee believes that such awards will serve
as incentives to the Company's executive officers by tying their interests
directly with those of the Company and its stockholders.
In 1995, the Committee granted long-term performance-based stock awards
under the Incentive Stock Plan to the executive officers, including the Chief
Executive Officer. The awards of Common Stock were fully contingent on
achievement of three performance measures (relative total return to
stockholders, average return on equity, and cumulative Company-created income)
over a three-year performance period beginning on January 1, 1995 and ending on
December 31, 1997. Based on results for that
13
<PAGE> 16
three-year period, stock awards were paid under the Incentive Stock Plan at 68%
of target awards granted as of January 1, 1995.
On February 4, 1998, the Committee approved the 1998-2000 Long-Term
Incentive Plan ("Long-Term Incentive Plan") pursuant to which the Committee may
grant to executive officers incentive awards in the form of Time-Vested Options,
Performance Shares or Challenge Grant Stock Appreciation Rights ("SARs").
Time-Vested Options are stock options that will vest December 31, 2003 unless
accelerated based upon the stock price performance of the Company. Performance
Shares are awards of Common Stock based upon the Company's three-year
performance ending December 31, 2000 relative to targets approved by the
Committee for cumulative normalized earnings per share and relative total
shareholder return. Such awards may be 0% to 200% of established targets.
Challenge Grant SARs are SARs that will vest upon the achievement of certain
stock prices at specified times. The Long-Term Incentive Plan is intended to
align the interests of the executive officers with those of the Company and its
stockholders and to encourage superior performance over time. Incentive awards
under the Long-Term Incentive Plan will be granted under the Incentive Stock
Plan.
CHIEF EXECUTIVE OFFICER
The Committee, in considering Mr. Patient's compensation for 1997, reviewed
his existing compensation arrangements, comparable compensation for chief
executive officers of other companies and the performance of Mr. Patient and the
Company. Although no material adjustment was made to Mr. Patient's salary during
1997, Mr. Patient was granted stock options.
With respect to incentive compensation for Mr. Patient, the Company
exceeded the 1997 threshold performance targets for cash flow and
Company-created income but did not meet the performance goal for relative total
return. Based on these factors and a review of Mr. Patient's individual
performance, Mr. Patient received an award of $280,000 under the Executive MIP.
This award represents approximately 48% of his salary, as compared to his 1996
award of $127,600 which represented approximately 20% of his 1996 salary. As
more fully described in footnote 1 to the Summary Compensation Table appearing
on page 15, 100% of this amount was deferred in the form of restricted stock.
Mr. Patient also received options under the Incentive Stock Plan to acquire
36,000 shares of Common Stock of the Company at an exercise price of $19.875 per
share. In determining the amount of this award, the Committee assessed his
leadership of the Company and reviewed Mr. Patient's performance relative to the
established financial performance measures for the year 1996.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Gale Duff-Bloom, Chairperson
James K. Baker
J.A. Fred Brothers
Harry A. Hammerly
D. Larry Moore
February 4, 1998
14
<PAGE> 17
The following table sets forth the compensation received for the three
years ended December 31, 1997 by the Company's Chief Executive Officer and the
persons who were at December 31, 1997 the four other most highly paid executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------- ----------------
OTHER OPTIONS/ ALL
ANNUAL RESTRICTED SARS LTIP OTHER
NAME AND COMPEN- STOCK (# OF PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) AWARDS(3) SHARES) (# OF SHARES)(4) SATION(5)
------------------ ---- ------ -------- --------- ---------- -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William F. Patient, 1997 $580,000 $350,000 $79,639 $ -0- 36,000 -0- $51,100
Chairman of the Board 1996 578,308 159,500 52,706 -0- 35,000 -0- 44,269
and Chief Executive Officer 1995 534,616 325,000 57,111 -0- 35,000 7,329 51,576
Thomas A. Waltermire, 1997 298,173 182,500 39,736 -0- 11,700 -0- 26,151
President and Chief Operating 1996 249,193 75,000 34,581 -0- 11,000 -0- 19,451
Officer 1995 228,092 125,000 35,236 -0- 11,000 2,094 21,186
Edward C. Martinelli, 1997 268,000 125,000 34,140 -0- 11,700 -0- 15,581
Senior Vice President, 1996 267,308 62,500 54,350 -0- 11,000 -0- 19,789
Corporate Development 1995 249,346 137,500 12,426 -0- 11,000 2,675 25,625
Donald P. Knechtges, 1997 222,500 114,400 30,330 -0- 9,800 -0- 37,942
Senior Vice President, 1996 222,058 49,500 24,920 -0- 9,000 -0- 38,596
Technology/Business 1995 210,470 94,600 16,454 -0- 10,000 2,512 40,004
Louis M. Maresca, 1997 217,846 104,625 30,625 -0- 9,700 -0- 16,472
Vice President, 1996 204,423 45,000 33,268 -0- 9,000 -0- 29,892
General Manager Resins 1995 189,462 87,750 12,362 -0- 9,000 2,512 32,079
</TABLE>
- ---------------
(1) Amounts represent the aggregate bonus payments to the named executive under
the Executive MIP for 1997, 1996 and 1995. The Executive MIP provided that a
minimum of 40% of the named executives' bonus awards, if any, under the plan
would be paid in the form of restricted stock awarded under the Company's
incentive stock plans. The participant may also elect to receive all or any
portion of the balance in the form of restricted stock. For each $1 of the
bonus amount paid in the form of restricted stock, $1.25 worth of restricted
stock is awarded. The portion of the award, if any, not paid in restricted
stock is paid in cash. Under the terms of the restricted stock award, the
restricted stock awarded may not be transferred for the three-year period
following the date of award. In the event a participant leaves the employ of
the Company prior to the lapse of the restrictions (other than by reason of
death, disability or retirement), the participant will forfeit up to 100% of
the 25% premium received in respect of the award. The amount of cash
(including payments in respect of fractional shares) and the market value
and number of the shares of restricted stock received by the named executive
officers, respectively, in respect of the 1997 bonus payments for each of
the named executive officers is as follows: W.F. Patient, $6 and $349,994
(14,973 shares); T.A. Waltermire, $11 and $182,489 (7,807 shares); E.C.
Martinelli, $125,000 and $0 (0 shares); D.P. Knechtges, $62,414 and $51,986
(2,224 shares); and L.M. Maresca, $46,515 and $58,110 (2,486 shares). For
1996, such amounts were as follows: W.F. Patient, $3 and $159,497 (8,025
shares); T.A. Waltermire, $12 and $74,988 (3,733 shares); E.C. Martinelli,
$13 and $62,487 (3,144 shares); D.P. Knechtges, $27,001 and $22,499 (1,132
shares); and L.M. Maresca, $20,017 and $24,983 (1,257 shares). For 1995,
such amounts were as follows: W.F. Patient, $14 and $324,986 (13,231
shares); T.A. Waltermire, $1 and $124,999 (5,089 shares); E.C. Martinelli,
$24 and $137,476
15
<PAGE> 18
(5,597 shares); D.P. Knechtges, $51,616 and $42,984 (1,750 shares); and L.M.
Maresca, $39,018 and $48,732 (1,984 shares).
(2) For 1997, amounts include tax gross-ups on personal benefits as follows:
W.F. Patient $32,909; T.A. Waltermire, $15,447; E.C. Martinelli, $13,750;
D.P. Knechtges, $12,284; and L.M. Maresca, $11,955. For 1996, amounts
include tax gross-ups on personal benefits as follows: W.F. Patient,
$22,542; T.A. Waltermire, $10,383; E.C. Martinelli, $17,484; D.P. Knechtges,
$10,443; and L.M. Maresca, $11,897. For 1995, amounts include tax gross-ups
on personal benefits as follows: W.F. Patient, $24,514; T.A. Waltermire,
$14,439; E.C. Martinelli, $1,769; D.P. Knechtges, $4,740; and L.M. Maresca,
$4,432.
(3) Except as described in footnote 1, there were no awards of restricted stock
in 1997, 1996 or 1995 to the named executive officers.
(4) Amounts for 1995 represent number of shares paid out January 1, 1995 in
respect of performance shares awarded to the named executive officers in
1992 under the BFG Long-Term Incentive Plan (the "BFG LTIP"). The number of
shares awarded was based on the Company's achievement of performance
objectives specified under the BFG LTIP (and converted at the time of the
IPO into performance objectives for the Company rather than BFG) for the
three-year period ended December 31, 1994 (net of withholding taxes).
(5) Amounts for 1997 represent, respectively, the Company's cash contributions
on behalf of the named executives to the Company's Retirement Savings Plan,
amounts accrued under a benefit restoration plan providing for benefits in
excess of the amounts permitted to be contributed under the Retirement
Savings Plan and amounts accrued with respect to the Executive MIP, and
premium payments by the Company under a split dollar life insurance program
as follows: W.F. Patient, $9,000, $42,100, and $0; T.A. Waltermire, $9,000,
$17,151, and $0; E.C. Martinelli, $9,000, $6,581, and $0; D.P. Knechtges,
$9,000, $7,966, and $20,976; and L.M. Maresca, $9,000, $7,562, and $16,472.
For 1996, such amounts are as follows: W.F. Patient, $9,000, $35,269, and
$0; T.A. Waltermire, $9,000, $10,451, and $0; E.C. Martinelli, $9,000,
$10,789, and $0; D.P. Knechtges, $9,000, $8,770, and $20,826; and L.M.
Maresca, $9,000, $7,105, and $13,787.
16
<PAGE> 19
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NO. OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/SARS OPTIONS/
GRANTED SARS GRANTED EXERCISE OR GRANT DATE
(# OF TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME SHARES)(1) IN FISCAL YEAR ($/SH) DATE VALUE(2)
---- ------------ -------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
W. F. Patient........... 36,000 11.3% $19.875 1-2-07 $287,280
T. A. Waltermire........ 11,700 3.7 19.875 1-2-07 93,366
E. C. Martinelli........ 11,700 3.7 19.875 1-2-07 93,366
D. P. Knechtges......... 9,800 3.1 19.875 1-2-07 78,204
L. M. Maresca........... 9,700 3.0 19.875 1-2-07 77,406
</TABLE>
(1) Of the options granted to W. F. Patient, 32,000 were immediately exercisable
and 4,000 become exercisable after one year. The following number of options
granted to the other named individuals become exercisable 35% after one
year, 70% after two years and 100% after three years as follows: T.A.
Waltermire, 9,500; E.C. Martinelli, 9,500; D.P. Knechtges, 8,000; and L.M.
Maresca, 8,000. The remaining options granted to the other named individuals
become exercisable 100% after one year. All of the options were granted with
limited stock appreciation rights which generally entitle the optionee to
elect to receive the appreciation on the option in cash for a 60-day period
following a "change of control" and were granted with exercise prices not
less than 100% of the fair market value of Common Stock.
(2) The grant date present values shown in the table were determined pursuant to
the Black-Scholes option valuation model (a widely used stock option
valuation methodology), using the following assumptions: stock price
volatility factor of .2819; dividend yield of 1.98%; interest rate of 6.54%;
and a ten year term. There were no adjustments made for non-transferability
or risk of forfeiture. The actual value, if any, that an executive officer
may realize from his or her stock options (assuming that they are exercised)
will depend solely on any gain in stock price over the exercise price when
the shares are sold.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
(# OF SHARES) ($) (2)
SHARES ACQUIRED -------------------- ----------------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (# OF SHARES) ($) (1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
W. F. Patient........... -0- $ -0- 353,299/ 4,000 $1,365,800/$14,000
T. A. Waltermire........ 7,421 6,453 121,544/22,148 528,400/ 41,000
E. C. Martinelli........ 13,890 20,016 128,627/22,148 602,600/ 41,000
D. P. Knechtges......... 2,111 5,860 75,652/18,648 322,500/ 34,300
L. M. Maresca........... -0- -0- 81,529/18,248 353,800/ 34,000
</TABLE>
17
<PAGE> 20
- ---------------
(1) Represents the difference between the option exercise price and the last
sale price of a share of Common Stock as reported on the New York Stock
Exchange on the date prior to exercise.
(2) Based on the last sale price of a share of Common Stock of $23.375 as
reported on the New York Stock Exchange on December 31, 1997. The ultimate
realization of profit, if any, on the sale of Common Stock underlying the
option is dependent upon the market price of the shares on the date of sale.
RETIREMENT PENSIONS
The Company has in effect a pension plan for salaried employees which
provides pensions payable at retirement to each eligible employee. The plan
makes available a pension which is paid from funds provided through
contributions by the Company and contributions by the employee, if any, made
prior to 1972. The amount of an employee's pension depends on a number of
factors including Final Average Earnings ("FAE") and years of credited service
to the Company. The following chart shows the annual pension amounts currently
available to employees who retire with the combinations of FAE and years of
credited service shown in the chart, which should be read in conjunction with
the notes following the chart. As of January 1, 1989, the plan generally
provides a benefit of 1.15% of FAE times all years of pension credit plus 0.45%
of FAE in excess of covered compensation times years of pension credit up to 35
years. In addition, employees actively at work on December 31, 1989 may receive
an additional pension credit of up to 4 years up to a maximum of 24 years of
pension credit. Benefits become vested after 5 years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------------------------------
15 20 25 30 35
FINAL --------------------- --------------------- -------- -------- --------
AVERAGE EARNINGS (1) (2) (1) (2)
---------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000.......... $ 21,892 $ 27,738 $ 29,199 $ 35,038 $36,498 $43,798 $51,097
200,000.......... 45,892 58,139 61,198 73,438 76,498 91,798 107,097
300,000.......... 69,892 88,539 93,198 111,838 116,498 139,798 163,097
400,000.......... 93,892 118,938 125,199 150,238 156,498 187,798 219,097
500,000.......... 117,892 149,339 157,198 188,638 196,498 235,798 275,097
600,000.......... 141,892 179,739 189,198 227,038 236,498 283,798 331,097
700,000.......... 165,892 210,138 221,199 265,438 276,498 331,798 387,097
800,000.......... 189,892 240,539 253,198 303,838 316,498 379,798 443,097
900,000.......... 213,892 270,939 285,198 342,238 356,498 427,798 499,097
1,000,000.......... 237,892 301,338 317,199 380,638 396,498 475,798 555,097
1,100,000.......... 261,892 331,739 349,198 419,038 436,498 523,798 611,097
1,200,000.......... 285,892 362,139 381,198 457,438 476,398 571,798 667,097
</TABLE>
- ---------------
(1) Assumes actively employed January 1, 1990 and after.
(2) Includes an additional 4 years of service applicable to pre-January 1, 1990
employees.
18
<PAGE> 21
(3) The pension plan uses either a "final average earnings" formula or a
"service credit" formula to compute the amount of an employee's pension,
applying the formula which produces the higher amount. The above chart was
prepared using the FAE formula, since the service credit formula would
produce lower amounts than those shown. Under the FAE formula, a pension is
based on the highest four consecutive calendar years of an employee's
earnings. Earnings include salary, overtime pay, holiday pay, vacation pay,
and certain incentive payments including annual cash bonuses, but exclude
awards under long-term incentive programs and the Company match in the
Company savings plans. As of December 31, 1997, final average earnings for
the individuals named in the Summary Compensation Table were as follows:
W.F. Patient -- $845,096.30; T.A. Waltermire -- $362,876.06; E.C.
Martinelli -- $371,284.10; D.P. Knechtges -- $296,455.96; and L.M.
Maresca -- $274,530.90.
(4) In computing the pension amounts shown, it was assumed that an employee
would retire at age 65 and elect to receive a five year certain and
continuous annuity under the pension plan and that the employee would not
elect any of the available "survivor options," which would result in a lower
annual pension. Pensions are not subject to any reduction for Social
Security or any other offset amounts.
(5) As of December 31, 1997, the five executive officers named in the cash
compensation table had the following years of credited service under the
pension plan or subsidiary plans or supplemental agreements: W.F. Patient, 8
years, 6 months; T.A. Waltermire, 23 years, 6 months; E.C. Martinelli, 34
years, 3 months; D.P. Knechtges, 32 years, 6 months; and L.M. Maresca, 6
years, 8 months.
(6) W.F. Patient became vested in benefits immediately and earns an additional
benefit equal to 1.6 percent of his final average annual earnings for each
of his first 15 years with the Company. These benefits are payable under an
unfunded, non-qualified supplemental plan.
(7) Benefits shown in the chart that exceed the level of benefits permitted to
be paid from a tax-qualified pension plan under the Internal Revenue Code of
1986, as amended (the "Code"), and certain additional benefits not payable
under the qualified pension plan because of certain exclusions from
compensation taken into account thereunder, are payable under an unfunded,
non-qualified supplemental pension plan.
MANAGEMENT CONTINUITY AGREEMENTS
The Company has entered into management continuity agreements (the
"Continuity Agreements") with certain employees, including all of the executive
officers named in the Summary Compensation Table. The purpose of the Continuity
Agreements is to encourage the individuals to carry out their duties in the
event of the possibility of a "change of control" of the Company. The Continuity
Agreements do not provide any assurance of continued employment unless there is
a change of control. The Continuity Agreements generally provide for a two-year
period of employment commencing upon a change of control, which generally is
deemed to have occurred if: (i) any person becomes the beneficial owner of 20%
or more of the combined voting power of the Company's outstanding securities
(subject to certain exceptions), (ii) there is a change in the majority of the
Board of Directors of the Company, (iii) certain corporate reorganizations occur
where the existing stockholders do not retain more than 60% of the
19
<PAGE> 22
common stock and combined voting power of the outstanding voting securities of
the surviving entity, or (iv) there is shareholder approval of a complete
liquidation or dissolution of the Company.
The Continuity Agreements generally provide for the continuation of
employment of the individuals in the same positions and with the same
responsibilities and authorities that they possessed immediately prior to the
change of control and with the same benefits and level of compensation,
including average annual increases. If the individual's employment is terminated
by the Company or its successor for reasons other than "cause" or is terminated
voluntarily by the individual for "good reason" (in each case as defined in the
Continuity Agreements), generally the individual would be entitled to receive:
(i) compensation for a period of up to three years, commencing at the
individual's base salary rate in effect at the time of the termination and
including average annual increases thereafter, (ii) the continuation of all
employee benefits and perquisites, and (iii) a lump sum equal to the total of
(A) up to three times the individual's annualized incentive compensation, which
shall be equal to the greater of that paid with respect to the calendar year
prior to such termination or the "target incentive amount" (as defined in the
Continuity Agreements) for the year of the change of control or the year of
termination and (B) up to three times the "calculated market value" of the
"restricted stock" and "performance stock" awarded to the individual in the
Company's most recent "plan cycle" (in each case as defined in the Continuity
Agreements). The Continuity Agreements also provide for a tax gross-up for any
excise tax due under the Code for any payments or distributions made under the
agreements.
OTHER AGREEMENTS
The Company entered into an agreement (the "Agreement") with Edward C.
Martinelli in connection with his retirement from the Company effective January
30, 1998. Under the terms of the Agreement, the Company waived the forfeiture of
certain shares of Company restricted stock awarded to Mr. Martinelli as of the
Company's IPO and agreed to provide Mr. Martinelli with certain benefits under
Company plans and policies provided to employees who retire from the Company.
The Company also agreed to pay Mr. Martinelli the sum of $1,435,000 in March
1998. This amount represents the approximate value of additional benefits to
which Mr. Martinelli would have been entitled had he retired from the Company at
age 62.
The Company also entered into a Consulting Agreement (the "Consulting
Agreement") with Mr. Martinelli which provides that Mr. Martinelli will render
certain consulting services to the Company from February 1, 1998 through January
31, 2000. The Company will pay Mr. Martinelli $15,000 per month during the first
year of the Consulting Agreement and $10,000 per month during the second year.
COMPANY STOCK PERFORMANCE
Following is a graph which compares the cumulative return from investing
$100 at April 29, 1993, the time of the IPO, the S&P 500 index and the S&P
Chemicals index, with dividends assumed to be reinvested when received. The S&P
Chemicals index includes a broad range of chemical manufacturers. Because of the
relationship of the Company's business within the chemical industry, it is felt
that comparison with this broader index is also appropriate.
20
<PAGE> 23
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE GEON COMPANY, S&P 500
INDEX AND S&P CHEMICALS INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THE GEON S&P
(FISCAL YEAR COVERED) COMPANY CHEMICALS S&P 500
<S> <C> <C> <C>
4/29/93 100.0 100.0 100.0
12/31/93 128.2 105.5 108.5
12/31/94 151.2 122.2 110.0
12/31/95 137.2 159.5 151.2
12/31/96 112.9 210.6 185.8
12/31/97 137.6 259.0 247.9
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN OTHER
RELATIONSHIPS
As discussed on page 5, the Compensation Committee is currently comprised
of James K. Baker, Gale Duff-Bloom, D. Larry Moore, and John D. Ong. J.A. Fred
Brothers and Harry A. Hammerly served as members of the Compensation Committee
during 1997 but resigned from the Committee on February 5, 1998. Mr. Brothers is
Executive Vice President of Ashland Inc. Ashland Chemical Co., a wholly-owned
subsidiary of Ashland Inc., purchased, directly and indirectly through
affiliates, approximately $58.4 million of product from the Company in 1997 and
expects to continue to purchase product from the Company in the future. The
amount of purchases and prices thereof were, and will continue to be, determined
on an arms-length basis.
21
<PAGE> 24
INDEPENDENT AUDITORS
Ernst & Young LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1997, and will continue to serve in that role
until the appointment of independent auditors by the Board of Directors in 1998.
The Board of Directors expects to appoint independent auditors for the fiscal
year ending December 31, 1998, upon recommendation by the Audit Committee, at
its May 1998 meeting. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting of Stockholders. The representative will be given
an opportunity to make a statement if desired and to respond to questions
regarding Ernst & Young LLP's examination of the Company's consolidated
financial statements and records for the year ended December 31, 1997.
GENERAL
VOTING AT THE MEETING
Stockholders of record at the close of business on March 16, 1998 are
entitled to vote at the meeting. On that date, a total of 28,078,360 shares of
Common Stock were outstanding. Each share is entitled to one vote.
Holders of shares of Common Stock have no cumulative voting rights.
Directors are elected by a plurality of the votes of shares present, in person
or by proxy, and entitled to vote on the election of directors at a meeting at
which a quorum is present. The affirmative vote of a majority of the shares of
Common Stock represented and voting, in person or by proxy, at any meeting of
stockholders at which a quorum is present is required for action by stockholders
on any matter, unless the vote of a greater number of shares or voting by
classes or series is required under Delaware law.
Votes may be cast in favor of or withheld from each nominee in the election
of directors. Votes that are withheld will be excluded entirely from the vote
and will have no effect. Brokers holding shares in street name that do not
receive instructions are entitled to vote on the election of directors. Under
Delaware law, a broker nonvote will have no effect on the outcome of the
election of directors.
If any of the nominees listed on pages 3 through 5 becomes unable or
declines to serve as a director, each properly signed proxy card will be voted
for another person recommended by the Board of Directors. However, the Board has
no reason to believe that this will occur.
The Board of Directors knows of no other matters that will be presented at
the meeting. However, if other matters do properly come before the meeting, the
persons named in the proxy card will vote on these matters in accordance with
their best judgment.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal to be considered for
inclusion in next year's Proxy Statement should send the proposal to the Company
addressed to the Secretary of the Company so that it is received on or before
November 20, 1998. The Company suggests that all proposals be sent by certified
mail, return receipt requested.
22
<PAGE> 25
PROXY SOLICITATION
The Company is making this proxy solicitation and will bear the expense of
preparing, printing, and mailing this Notice and Proxy Statement. In addition to
requesting proxies by mail, officers and regular employees of the Company may
request proxies by telephone or in person. The Company has retained Morrow &
Co., Inc., 505 Third Avenue, New York, NY 10022-4799, to assist in the
solicitation for an estimated fee of $5,000 plus reasonable expenses. The
Company will ask custodians, nominees, and fiduciaries to send proxy material to
beneficial owners in order to obtain voting instructions. The Company will, upon
request, reimburse them for their reasonable expenses for mailing the proxy
material.
The Company's Annual Report to Stockholders, including consolidated
financial statements for the year ended December 31, 1997, is being mailed to
stockholders of record with this Proxy Statement.
For the Board of Directors
The Geon Company
/S/ Gregory L. Rutman
Gregory L. Rutman, Secretary
March 20, 1998
23
<PAGE> 26
March 20, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at The Forum Conference & Education Center, 1375 E. Ninth Street,
Cleveland, Ohio, at 9:00 a.m. on Thursday, May 7, 1998.
The Notice of Annual Meeting of Stockholders and the Proxy Statement describe
the matters to be acted upon at the meeting.
Regardless of the number of shares you own, your vote on these matters is
important. Whether or not you plan to attend the meeting, we urge you to mark
your choices on the attached proxy card and to sign, date, and return it in
the envelope provided. If you later decide to vote in person at the meeting,
you will have an opportunity to revoke your proxy and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE
PROXY CARD.
We look forward to seeing you at the meeting.
/s/ William F. Patient
WILLIAM F. PATIENT
Chairman of the Board
and Chief Executive
Officer
Detach Proxy Card Here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES
LISTED IN ITEM 1.
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY to vote
term to expire at next listed below [ ] for all nominees listed below.
Annual Meeting.
[ ] *EXCEPTIONS [ ]
Nominees: William F. Patient, James K. Baker, Gale Duff-Bloom, J.A. Fred
Brothers, J. Douglas Campbell, D. Larry Moore, John D. Ong,
R. Geoffrey P. Styles, and Thomas A. Waltermire.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
*Exceptions:_________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof and matters incident to the conduct of the meeting.
Change of Address and [ ] I Will Attend [ ]
or Comments Mark Here the Meeting
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer
and affix corporate seal. If a partnership, please sign in partnership name
by general partner.
----------------
Dated: _____________________, 1998
____________________________(SEAL)
Signature
____________________________(SEAL)
Signature if held jointly
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 27
THE GEON COMPANY
PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints William F. Patient and Gregory L. Rutman,
and each of them jointly and severally, Proxies, with full power of
substitution, to vote, as designated on the reverse side, all shares
of Common Stock of The Geon Company held of record by the undersigned on
March 16, 1998, at the Annual Meeting of Stockholders to be held May 7, 1998,
or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
TO SERVE AS DIRECTORS. The shares represented by this Proxy will be voted as
specified on the reverse side. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED
ON THE REVERSE SIDE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES
SPECIFIED IN ITEM 1.
(Continued and to be dated and signed on the reverse side.)
THE GEON COMPANY
P.O. BOX 11056
NEW YORK, N.Y. 10203-0056
